Household Employment

How to set up nanny payroll to save you $8,000 at tax time

Is your household’s nanny payroll set up to save you money — and avoid the risk of penalties and fines — in 2021?  

By Lauren Orcutt

At tax time, your household could be eligible for an $8,000 tax credit thanks to the American Rescue Plan. The law also increased the limit for contributions to dependent-care flexible spending accounts (FSAs), from $5,000 for married couples up to $10,500.  

But to qualify for any of these benefits, you have to pay your employees on the books. 

Too often, families fall into the trap of believing that paying your nanny and other household employees in cash is a win-win — when in reality, paying them legally is better for both you and your employees.  

Why legal nanny payroll is better for you 

The ability to take advantage of tax credits and FSA benefits is a start, but you also avoid the risk of serious penalties and fines. Let’s say your former nanny files for unemployment, after years of being paid under the table. Without any record of her payment history, she is ineligible, and you run the risk of being audited and fined for significant tax evasion. 

Why legal nanny payroll is better for your employees 

When you pay your household employees under the table, it’s nearly impossible for them to qualify for a credit card or a mortgage. They can’t file for unemployment if you need to let them go, and they won’t qualify for retirement benefits. Many families feel like their nanny is a part of the family, but make the mistake of setting them up for a life without the supports they need. Paying your nanny in cash may sound good for both parties, but the long-term consequences are not worth the risk. 

Good news: legal nanny payroll is easier than you think 

Paying your nanny legally should be easier than paying in cash. And with Nines, the all in one household management platform built for families like yours, it can be.  

Nines allows you to automate nanny payroll in three simple steps (even better, you only need to handle one of them): 

  1. Sign up as an employer in less than 10 minutes 
  2. We onboard your employees, collecting all of the necessary tax information and setting them up with direct deposit or paychecks 
  3. We ensure timely and compliant paychecks and tax filings for all of your household employees (full-time, part-time, and hourly) 

That’s it! Want to give it a try before the end of 2021 so you can take full advantage of dependent care tax credits? Sign up today.

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